May 7, 2010
When The "Three Musketeers" Ain't Nuthin' But A Candy Bar
When The "Three Musketeers" Ain't Nuthin' But A Candy Bar Cliff Ennico www.creators.com #147;I#146;m the founding member of a limited liability company (LLC). Over two years I let in two other members, and ended up resigning my majority ownership (stupid move). I trusted these guys. You know, we were supposed to be #145;The Three Musketeers#146;. Over the years I developed a ton of great marketing materials and created many educational, television and documentary film products for the LLC. Now I#146;ve been isolated, voted out as Manager, been completely taken out of the loop (they have a current court order against them for now showing me financial documents I#146;ve been asking for for nine months) and they#146;re trying to hold me to a broad noncompete agreement which says that any member won#146;t undertake any transactions which may be considered to be competitive with the LLC. Yet, they won#146;t let me out of the LLC either, unless I turn over to the LLC all rights that I may have in every product created by me over the past eight years. Crazy situation, huh?#148; Crazy, yeah, but not all that uncommon, as readers of this column know. Don#146;t you now wish you had a lawyer representing you when you brought in these two guys? It could have saved you a ton of grief. You#146;re obviously in litigation with your old LLC and have a lawyer representing you; I#146;m not going to say anything here to second guess his or her judgment because I don#146;t have all the facts. But it sounds like you never assigned to the LLC your copyrights in the television programs, film scripts, and other materials you created for the LLC (if you had done so, your former partners wouldn#146;t be asking you to do that now). If that#146;s the case, you probably still own these rights, and that gives you some real leverage over the other LLC members. Works created by an LLC member, unlike those created by an employee, are not considered #147;works made for hire#148; under the federal copyright laws. They have to be actually assigned to the LLC in writing. Ask your attorney if it#146;s possible to get a court order, called an #147;injunction#148;, prohibiting the LLC from using any of your creative works without your permission until the lawsuit is resolved or settled. That should get your former business partners to the bargaining table real fast. Next time you set up an LLC with someone, make sure your Operating Agreement clearly spells out that (1) you are the only Manager, (2) you can only be removed as Manager by a vote of 100% of the members (including yourself), and (3) all decisions relating to the LLC business are to be made by you alone. And if anyone ever talks about #147;Three Musketeers#148; again, offer them a candy bar. #147;I am in a rock band with some other guys, and we currently have a tax ID number. Well, our manager got a tax ID number for the band in order for us to open a business checking account at the bank. Now we have a problem because he is not going to be managing us anymore. I will be handling all of the banking transactions from now on. How do I go about getting a new tax ID number? Or, can our old manager just transfer that tax ID to be under my name?#148; It sounds like you may have a bigger problem here than just tax ID numbers. If your old manager filed for your tax ID number as a #147;partnership#148; (which is what your rock band is, legally) and named himself as a partner, he is technically your business partner, and you cannot legally get rid of him without buying him out for whatever he considers a fair price. You need to get to a lawyer, pronto, for some legal advice. If your old manager is willing to be #147;bought out#148;, make sure he assigns over to you all rights he may have in any songs or other copyrighted material you may have developed. Otherwise he owns a piece of your music going forward, and you don#146;t want that. I#146;ve said it before -- never, ever, ever form a music group without (1) a clear written partnership agreement among the members saying who#146;s in the band, who owns what songs, how band members can withdraw, and how band members can be forced out, and (2) a clear written #147;representation agreement#148; between the band and any agent, manager, promoter, or similar person who gets paid for doing anything to help the band. Without agreements, the wrong people tend to get a lot more powerful than they deserve to be. For a scary look at how one rock band really fouled up its relationship with its agent/manager, read #147;Got a Revolution!#148;, Jeff Tamarkin#146;s biography of the 1960#146;s psychedelic rock band Jefferson Airplane. These guys needed #147;Somebody to Love,#148; and they didn#146;t get one for a long, long time. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest book is #145;Small Business Survival Guide#146; (Adams Media, $12.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2006 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com.

Posted by Staff at 1:48 AM